| Indicator | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue | ¥2976.6B | ¥3245.1B | -8.3% |
| Operating Income | ¥547.4B | ¥405.8B | +34.9% |
| Ordinary Income | ¥644.7B | ¥409.4B | +57.5% |
| Net Income | ¥603.3B | ¥93.7B | +544.0% |
| ROE | 17.3% | 2.8% | - |
For the full year ended March 2026, Revenue was ¥2,976.6B (YoY -¥268.5B / -8.3%), a decline, while Operating Income rose to ¥547.4B (YoY +¥141.6B / +34.9%), Ordinary Income increased to ¥644.7B (YoY +¥235.3B / +57.5%), and Net Income attributable to owners of the parent increased substantially to ¥296.2B (YoY +¥51.7B / +21.2%). The operating margin expanded by 5.9pt from 12.5% to 18.4%. SG&A expenses were reduced significantly to ¥1,042.1B (YoY -¥799.6B / -14.3%), with cuts in advertising expenses of ¥107.9B ( -¥256.3B) and fees of ¥325.3B ( -¥83.6B) contributing. Non-operating items included foreign exchange gains of ¥72.1B and interest income of ¥28.3B which boosted results at the ordinary income level, but Extraordinary Losses of ¥141.5B (mainly impairment/retirement of fixed assets) and a high effective tax rate of 41.1% constrained Net Income growth. Operating Cash Flow was ¥515.8B (YoY +¥87.0B / +20.6%), generating 1.74x of Net Income, and Free Cash Flow was ¥453.8B, comfortably covering dividends and capital expenditure.
[Revenue] Revenue was ¥2,976.6B (YoY -8.3%), a decline. By segment, Digital Entertainment (DE) was ¥1,728.8B ( -16.3%), with the core business in an adjustment phase weighing on consolidated Revenue. The DE decline was mainly due to timing shifts in major new releases and the completion of the previous year's strong titles. Meanwhile, Rights & Property and related merchandise (Goods) grew strongly to ¥250.6B (+31.4%), Amusement amounted to ¥721.3B (+1.3%) showing slight growth, and Publishing was ¥297.1B ( -3.4%) a slight decline. By region, Domestic was ¥1,979.2B and Overseas ¥997.2B, representing 66.5% Domestic and 33.5% Overseas. A foreign translation adjustment of ¥4.5B was recorded in OCI on the BS, and foreign exchange gains of ¥72.1B were recorded in non-operating items, providing a positive contribution when converting overseas sales into yen. Overall, high DE dependence makes the title cycle a clear driver of consolidated revenue volatility.
[Profitability] Gross profit was ¥1,589.5B (gross margin 53.4%), remaining at a high level, up ¥18.9B YoY. SG&A was significantly reduced to ¥1,042.1B, leading to Operating Income of ¥547.4B (+34.9%), a double-digit earnings increase. The operating margin improved by 5.9pt to 18.4% from 12.5% a year earlier. By segment, DE Operating Income was ¥433.6B (margin 25.1%), Goods was ¥112.4B (margin 44.8%) showing high profitability, Amusement ¥88.8B (margin 12.3%), and Publishing ¥98.5B (margin 33.1%); all segments remained profitable. Notably, DE achieved a +28.0% profit increase despite declining revenue, driven by high-margin titles, higher download ratios, and cost optimization. Non-operating income totaled ¥104.3B (mainly ¥72.1B FX gains and ¥28.3B interest income), a substantial increase from ¥39.7B the prior year; together with non-operating expenses of ¥7.0B (including ¥4.6B commission fees), Ordinary Income expanded to ¥644.7B (+57.5%). Extraordinary income was ¥0.3B while Extraordinary losses were ¥141.5B (fixed asset retirement loss ¥2.7B, impairment of investment securities ¥9.3B, etc.), resulting in Profit before Tax of ¥503.6B. After corporate taxes and others of ¥207.1B (effective tax rate 41.1%), Net Income attributable to owners of the parent was ¥296.2B (+21.2%). Comprehensive income was ¥306.8B, with foreign translation adjustment ¥4.5B, valuation differences on available-for-sale securities ¥2.7B, and actuarial differences on retirement benefits ¥3.2B recorded in OCI; the divergence from Net Income was small and overall earnings quality was broadly favorable. In conclusion, the company delivered higher profits despite lower revenue, driven by efficiency gains in advertising and fees and a favorable FX tailwind.
The Digital Entertainment Business recorded Revenue of ¥1,728.8B ( -16.3%) but Operating Income of ¥433.6B (+28.0%, margin 25.1%), reflecting improved profitability. While revenue decreased due to timing shifts for major titles and the lapping of prior-year strong releases, monetization of live-service titles and optimization of outsourcing and advertising costs expanded the margin by 4.2pt from 20.9% a year earlier. The Amusement Business recorded Revenue of ¥721.3B (+1.3%) and Operating Income of ¥88.8B (+13.1%, margin 12.3%), showing stable growth. Facility utilization and equipment sales/rental contributed, improving margin by 1.3pt from 11.0% previously. The Publishing Business had Revenue of ¥297.1B ( -3.4%) and Operating Income of ¥98.5B ( -10.3%, margin 33.1%), a decline in revenue and profit; although affected by a mature comics market and lower magazine sales, high profitability was maintained. Rights & Property and related merchandise (Goods) posted Revenue of ¥250.6B (+31.4%) and Operating Income of ¥112.4B (+85.2%, margin 44.8%), a standout performance. IP licensing expansion and strengthened goods sales drove margins up by 14.0pt from 30.8% a year ago, increasing its contribution to 20.5% of consolidated operating profit. After company-level adjustments, consolidated Operating Income was ¥547.4B with all segments remaining profitable; high margins in DE and Goods were the main drivers of consolidated margin improvement.
[Profitability] Operating margin of 18.4% improved by 5.9pt from 12.5%, and gross margin remained high at 53.4%. ROE of 17.3% (improved significantly from prior ROA 9.9%, estimated prior-year ROE about 7–8%) was driven mainly by the sharp improvement in profitability and composed of Net Profit Margin 9.9%, total asset turnover 0.68x, and financial leverage 1.25x. The effective tax rate of 41.1% is high, and the tax burden coefficient of 0.588 dampened Net Income growth. [Cash Quality] Operating Cash Flow of ¥515.8B is 1.74x Net Income of ¥296.2B, indicating strong cash generation. Operating CF / Revenue ratio was 17.3%, and the ratio of OCF to EBITDA (Operating Income + Depreciation) of ¥636.2B was 0.81x, broadly healthy. Operating CF subtotal before working capital changes was ¥528.8B, with inventory increase of -¥96.8B and accounts receivable decrease of +¥31.0B as primary drivers. The accrual ratio ((Net Income - Operating CF) / Total Assets) was -5.0%, negative, indicating cash generation exceeding accounting profit. Free Cash Flow was ¥453.8B, providing approximately 1.8x coverage for dividends and capital expenditure totaling ¥186.3B + ¥62.5B. [Investment Efficiency] Total asset turnover of 0.68x declined from 0.78x, driven by slower sales and asset growth (Total Assets ¥4,380.2B, YoY +¥218.6B). Capital expenditure was suppressed at ¥62.5B (2.1% of Revenue), below depreciation of ¥86.9B, resulting in negative net investment. R&D expense was ¥25.4B (0.9% of Revenue), indicating limited new development investment, likely supplemented by outsourcing and operational improvements. [Financial Soundness] Equity Ratio was 79.7%, Current Ratio 493%, and Quick Ratio 485%, extremely robust. Interest-bearing debt is effectively zero, interest expense was ¥0.8B (minimal interest burden), and interest coverage is approximately 644x. Cash and deposits of ¥2,760.5B were 3.7x current liabilities of ¥747.3B, minimizing short-term liquidity risk. Asset retirement obligations (ARO) totaled ¥61.0B (current ¥4.6B + non-current ¥56.4B), about 6.9% of total liabilities. Although future provisioning for asset removal/dismantling will be required, it is manageable given the current cash position.
Operating CF was ¥515.8B (YoY +20.6%), generating 1.74x of Net Income ¥296.2B. Operating CF subtotal (before working capital changes) was ¥528.8B, primarily driven by depreciation of ¥86.9B and adjustments for foreign exchange gains/losses of -¥49.2B and fixed asset retirement losses of ¥2.7B, among other non-cash charges. In working capital movements, inventory increase of -¥96.8B (accelerated build from prior-year +¥15.8B) tied up cash, while reduction in accounts receivable of +¥31.0B (improvement from prior-year +¥115.4B) provided relief. Accounts payable was almost flat at -¥0.5B, and decrease in other current liabilities of -¥30.3B was an additional cash outflow. After corporate tax payments of -¥61.6B and interest/dividend receipts of +¥28.3B, Operating CF settled at ¥515.8B. Investing CF was -¥62.1B, primarily capital expenditures of -¥62.5B (acquisition of tangible fixed assets). Other limited investments included intangible asset additions -¥11.5B, purchase of investment securities -¥3.8B, and acquisition of subsidiary shares -¥3.6B. Free Cash Flow (Operating CF + Investing CF) was ¥453.8B, a substantial improvement from about ¥278B a year earlier. Financing CF was -¥184.3B, driven mainly by dividend payments of -¥186.3B (a significant increase from -¥67.2B the prior year). Share buybacks were -¥0.1B (negligible), and lease liability repayments were -¥3.7B. Net increase in cash and cash equivalents was ¥321.9B, bringing the year-end balance to ¥2,757.9B. The Operating CF / EBITDA ratio of 0.81x is near a healthy range and supports the cash backing of profits. The inventory increase of -¥96.8B (inventory +22% YoY) warrants monitoring of future sales absorption pace. Overall, strong Operating CF generation and restrained capital expenditure produced ample FCF, with net cash increasing even after dividends and returns.
Compared to Net Income of ¥296.2B, Operating CF of ¥515.8B (1.74x) indicates strong cash backing of earnings. The gap between Ordinary Income ¥644.7B and Net Income ¥296.2B was mainly due to Extraordinary Losses of ¥141.5B (fixed asset retirement loss ¥2.7B, valuation loss on investment securities ¥9.3B, etc.) and a high effective tax rate of 41.1%, which compressed final profit. Non-operating income was ¥104.3B, equivalent to 3.5% of Revenue, consisting mainly of foreign exchange gains ¥72.1B (approximately ¥59.0B greater than the prior year tailwind) and interest income ¥28.3B. FX gains arose from valuation gains in yen conversion of USD/EUR-denominated overseas sales and translation differences of overseas subsidiaries, and likely include both realized and unrealized components. A reversal in FX direction would eliminate the positive effect on Ordinary Income, so the stability of non-operating income is limited. Comprehensive income of ¥306.8B versus Net Income of ¥296.2B differed by ¥10.6B, primarily due to foreign translation adjustment ¥4.5B, valuation differences on securities ¥2.7B, and actuarial differences on retirement benefits ¥3.2B. OCI items are small and divergence from Net Income is minor, indicating favorable earnings quality on a comprehensive basis. The accrual ratio of -5.0% shows cash generation exceeding accounting profit, but is offset by inventory build of +¥96.8B tying up cash and AR improvements of +¥31.0B. The sharp inventory increase may imply either pre-stocking for future sales plans or slowing sales, necessitating monitoring of inventory turnover. Overall, operational earnings are high-quality and sustainable, but reliance on FX gains, high tax rates and occurrence of extraordinary losses increasing final profit volatility, and inventory accumulation as a cash constraint are the primary earnings-quality considerations.
Full-year guidance was Revenue ¥2,980.0B (actual ¥2,976.6B, achievement 99.9%), Operating Income ¥490.0B (actual ¥547.4B, achievement 111.7%), Ordinary Income ¥490.0B (actual ¥644.7B, achievement 131.6%), and Net Income attributable to owners of the parent ¥310.0B (actual ¥296.2B, achievement 95.5%). Revenue was roughly in line with guidance, Operating and Ordinary Income significantly beat, while Net Income fell slightly short. The upside in Operating and Ordinary Income was mainly driven by greater-than-expected SG&A reductions and FX gains. The shortfall in Net Income was influenced by Extraordinary Losses of ¥141.5B (unforeseen fixed asset retirements etc. not assumed at guidance stage) and the high effective tax rate of 41.1%. Forecast EPS of ¥85.99 versus actual ¥82.15 missed by about 4.5%. Dividend guidance was annual ¥18.0 (post-split), while actual annual dividends were disclosed as ¥28.0 (Q2 54.0 + year-end 25.0 are not directly additive post-split; pre-split annual dividend equates to ¥129.0), resulting in a payout ratio of approximately 63% and maintaining stability. Overall, cost improvements and FX tailwinds led to upside at the profit level, but one-off charges and high tax rates suppressed final profit, and the results can be considered broadly in line with guidance.
Annual dividends were Q2 (interim) ¥54.0 and year-end ¥25.0; considering the 1:3 stock split on October 1, 2025, the year-end dividend ¥25.0 is the post-split amount and the Q2 dividend ¥54.0 is pre-split, so simple summation is not appropriate. Company disclosures indicate pre-split annual dividends equivalent to ¥129.0. Total dividends amounted to ¥186.3B (as recorded in Financing CF), corresponding to a Payout Ratio of approximately 63% against Net Income attributable to owners of the parent ¥296.2B (consistent with XBRL PayoutRatio 0.634). Total dividends the prior year were ¥67.2B, so this year represented a large increase, likely supported by past retained earnings and this year’s high profit level. Share buybacks were ¥0.1B (negligible), so the Total Return Ratio is effectively equivalent to the payout ratio of 63%. Free Cash Flow of ¥453.8B provides about 2.4x coverage for dividends of ¥186.3B, and cash and deposits of ¥2,760.5B are 3.7x current liabilities, supporting dividend sustainability. Although a 63% payout ratio is relatively high, abundant Operating CF (1.74x Net Income) and restrained capital expenditure reduce downside pressure on dividends. Depending on title release timing and tax rate trends, the effective payout ratio may vary, but substantial net cash suggests the company can maintain a shareholder return stance in the medium term.
Hit dependency / title cycle risk: The Digital Entertainment business accounts for 57.7% of Revenue, and timing and market reception of major new titles can cause large quarter-to-quarter and year-to-year swings in performance. This fiscal year saw DE Revenue -16.3% and an adjustment phase, though Operating Income increased through higher profitability. Going forward, the depth of the title pipeline and initial reception of new releases will determine performance. Inventory up +22% YoY introduces potential risks of delayed sales realization or impairment. Declines in NRR (Net Revenue Retention) for live titles or ARPU could also dampen revenues medium-term.
Rebound risk from cost optimization: Advertising expenses decreased from ¥143.6B to ¥107.9B (-¥35.7B / -24.8%), and fees decreased from ¥409.1B to ¥325.3B (-¥83.8B / -20.5%), materially contributing to improved operating margins. However, cost suppression was easier this year due to limited major releases; when large titles are launched, advertising and promotion expenses are likely to expand again, potentially flattening or reducing margins. The sustainability of cost efficiencies depends on the title release cycle and platform fee trends (App Store/Google Play, etc.).
Tax burden and volatility from one-off items: The effective tax rate of 41.1% substantially exceeds statutory rates around 30%, suggesting limits on deferred tax asset recognition or impacts from overseas taxation. Extraordinary Losses of ¥141.5B (fixed asset retirement loss ¥2.7B, valuation losses on investment securities ¥9.3B, etc.) compressed Profit before Tax ¥503.6B to Net Income ¥296.2B. Foreign exchange gains of ¥72.1B bolstered Ordinary Income, but a reversal in FX would slow Ordinary Income. While operating profits are high-quality, tax rate, extraordinary losses, and FX create a structure that increases Net Income volatility and makes forecasted Net Income uncertain.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 18.4% | 8.1% (3.6%–16.0%) | +10.3pt |
| Net Profit Margin | 20.3% | 5.8% (1.2%–11.6%) | +14.4pt |
Profitability materially exceeds industry median and lies in the upper range, supported by high gross margin and cost containment.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -8.3% | 10.1% (1.7%–20.2%) | -18.4pt |
Revenue growth lags the industry median substantially and is in an adjustment phase. Volatility from title cycles makes growth unstable and recovery in the next fiscal year is a key focus.
※ Source: Company compilation
Significant improvement in operating margin to 18.4% via cost optimization and high-quality Operating CF generation (1.74x Net Income) strengthened the financial base despite lower Revenue. FCF is roughly 1.8x dividends and capex, and abundant net cash of ¥2,760.5B supports strong return and M&A capacity. ROE 17.3% shows improvement from past levels and capital efficiency is on an improving trajectory. How the company chooses to deploy cash (growth investment, additional returns, M&A, etc.) will be key to medium-term shareholder value.
High profitability in Digital Entertainment (margin 25.1%) and rapid growth in Goods (Revenue +31.4%, Operating Income +85.2%) improved the profit structure. However, concentration risk with DE accounting for roughly 60% of Revenue and a low R&D ratio of 0.9% raise uncertainty about long-term new IP generation. Inventory build +22% YoY entails potential impairment risk depending on next-period sales achievement and turnover. The depth of the title pipeline, maintenance of NRR for live titles, and sustainability of advertising/fee efficiencies will determine earnings stability going forward.
Foreign exchange gains ¥72.1B and interest income ¥28.3B boosted Ordinary Income, but the persistence of non-operating income is limited. Extraordinary Losses ¥141.5B and a high effective tax rate of 41.1% compressed Net Income, resulting in actual Net Income ¥296.2B against forecast ¥310.0B ( -4.5% miss). Next year’s Net Income range will depend on tax rate normalization (potential decline to the low-30s), recurrence of extraordinary losses, and FX trends. While operating-level earnings are high-quality, final profit remains volatile and forecasting accuracy requires caution.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement disclosure data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions should be made at your own responsibility and, if necessary, after consulting a professional.